How Should We Live Now?

Review of Is Socialism Feasible? Towards an Alternative Future by Geoffrey M. Hodgson

It’s not that surprising, with so many major Western economies in mothballs in response to the coronavirus pandemic and the Bank of England warning of Britain’s deepest recession in 300 years, that lockdown has begun to encourage a rethink of how we live, prompting a plethora articles in the press on how the virus is going to change the world.

In this context, Geoffrey Hodgson’s new book, Is Socialism Feasible? Towards an Alternative Future, is timely. In it, he makes a renewed case for the mixed economy and for liberal (or social) democracy, as well as for cautious, experimental reform. Against the small state, laissez-faire liberalism resurgent from the 1970s, he attempts to develop a strand of politics from within the liberal tradition that is more socially conscious. At the same time, he musters a strong case against “big” socialism, or systems in which state ownership and central planning are extensive.

The discussion of the book is split into two. The first half offers a critical overview of the history of socialism as a doctrine of public ownership, of socialist-style experiments, large and small, and of the key lessons to be drawn from them. In the second half of the book, the author examines the question of individual choice, concluding that informed choice, underpinned by institutional support, is needed to ensure that individuals’ preferences are not overly swayed by special interests. On the relationship of market and state, he argues that property rights, far from arising spontaneously, are constituted by the state. This feeds into a broader claim that, in the most successful modern economies, the state and the market work together. Within the range of “really existing” capitalisms, the author singles out the Nordic countries as worth learning from, owing to their generally high levels of income, welfare and well-being.

Many of the charges that Professor Hodgson levels against “big” socialism are not new. When lined up side by side, however, it is hard to deny their force.

Politically, the main argument against large-scale state ownership is that, in the absence of offsetting support from different forms of economic ownership, the fusion of political and economic power undermines democratic practices and bodies. This is not accidental, but flows from the kinds of institutions involved. The point is fleshed out using the examples of the Soviet Union and Hugo Chávez’s Venezuela.

Economically, the line of reasoning is twofold. The first argument focuses on tacit nature of much knowledge in a modern economy. Among the author’s examples of tacit knowledge are riding a bike or learning a foreign language. These are learned by imitation and habituation, but can be hard to articulate fully. This means that a lot of useful information exists only at the local level, remaining inaccessible to central planners. Markets, by contrast, can to hoover up local information in a continuous, decentralised way, repackaging it as price movements, which indicate where production should be expanded or cut. This argument is associated with Ludwig Mises and Friedrich Hayek. However, Professor Hodgson is keen to stress the contributions of Albert Schäffle and Michael Polanyi. Already in the 1870s Schäffle was warning that, in the absence of markets, administrative coercion necessarily takes the place of material incentives. Michael Polanyi elaborated on the superiority of markets over hierarchical organisations in adapting to change, because of their greater flexibility in handling information flows. This allows decentralised economic actors to react to each other’s behaviour as it alters. A second key economic argument against big state socialism is the problem of material incentives, which for each individual are diluted as the scale of an operation rises, affecting effort and innovation. As Soviet-type economies did not build into the social fabric the ability continuously to “revolutionise the forces of production”, they failed even on their own terms.

State ownership is not the only form of public ownership, and democratic civic control of economic life has sometimes been proposed as a way to prevent the overconcentration of power. However, as Professor Hodgson points out, other than at a broad, guiding level, routine mass voting on every decision would be impractical.

Much of the above is convincing and ties in with more detailed studies of Soviet-type economies. However, some of the author’s arrows seem off-target. This is because, today, the resurrection of comprehensive economic planning is not a serious political proposal for many contemporary socialists. More typical is the call for public provision of essentials, especially in areas in which the effects of market failure (eg income inequality or environmental damage) are most severe. Rather than wholesale workers’ control, many would think an extension of workplace participation a good starting point. Lastly, rather than direct participation in all aspects of economic decision-making, a more typical contemporary proposal might be for local budgetary participation, in which communities, informed by specialists, have a say in the broad direction of spending priorities in their areas. These ideas overlap with, or are not too far away from, Professor Hodgson’s own policy suggestions.

In this review, I have only scratched the surface of Professor Hodgson’s book, which addresses some of the large-scale questions of how we should run our political and economic lives, given what is possible. It is a substantial and high-quality piece of scholarship with which socialists and social democrats should be willing to engage, even if they do agree with the author at every turn. It is not hard to admit that post-war, West European social democratic capitalism has been a historical high point for working people; or that any attractive or worthwhile version of socialism would have to at least incorporate many of its best ideals. However, it would be an unnecessarily bleak conclusion that this was far as humanity was going to get. That’s why the application of economic experimentation recommended by the author should not be restricted only to the kinds of organisations and property forms that we have seen up until now.